Jonah Peretti
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Masters of Scale: Rapid Response Transcript – Jonah Peretti “How BuzzFeed Bounced Back” Click here to listen to the full Masters of Scale: Rapid Response episode with Jonah Peretti. JONAH PERETTI: The challenge is that the past is not really a great guide of what things are going to be like in the future. Talking to you reminds me of our last conversation and just how different things are in the world, and also in BuzzFeed's business, in just a relatively short amount of time. And whether it's the digital economy, or whether it's unexpected things like a pandemic, you just have to be able to build a company that is so adaptable and dynamic and can change and shift in order to navigate this economy. The Trump presidency had a huge impact on the news industry. Trump was very focused on those sort of baby boomer brands and was constantly in fights with them. And to me it felt like the millennials and the gen Z's were just forgotten about. The digital strategy became the strategy for the whole business during COVID. And as a pure play digital company, BuzzFeed was in a really good position to say, "Hey, why don't you partner with us?” BOB SAFIAN: That’s Jonah Peretti, founder and CEO of BuzzFeed. The pandemic forced dramatic adjustments to BuzzFeed’s business and its content. Yet by the end of 2020 Jonah and his team had engineered a rebound, finishing with record profitability. I’m Bob Safian, former editor of Fast Company, founder of The Flux Group, and host of Masters of Scale: Rapid Response. I wanted to talk to Jonah not only because BuzzFeed recently announced plans to go public via SPAC at a $1.5 billion valuation, but because Jonah has uncommon insight into digital-first customers and businesses. Jonah’s also been a wizard in knowing when to patiently finetune things, through grinding detail-oriented effort, and when to quickly take advantage of new opportunities. And his assessment of Trump’s impact on the media business is priceless. [THEME MUSIC] SAFIAN: I'm Bob Safian, and I'm here with Jonah Peretti, the founder and CEO of BuzzFeed. Jonah is talking to us from his home in Los Angeles as I ask my questions from the opposite coast. Jonah, thanks for joining us. PERETTI: Thanks for having me. SAFIAN: So you recently announced that BuzzFeed would be going public via SPAC at a billion and a half dollar valuation. But when you were on this show a year ago, that seemed like a long way off. You talked about how tens of millions of dollars of revenue had evaporated, that you cut $40 million in costs, but you still weren't sure you could even end the year at break even. What happened? I mean, when did things start to turn around? PERETTI: 2020 was a really difficult and scary year. Of course, for the human cost of having so many people get sick and so many people die and just a really tough year where initially the focus was how do I keep people safe on our team? How do we have the best possible impact in terms of public health and in terms of the information we're putting out? And then after that, there was this business concern of tens of millions of dollars from theatrical film advertising, from travel advertising, even the auto advertisers, their ads had people high-fiving and getting into cars together, and they couldn't run the creative. So we had tons of cancellations. And then I would say the back half of the year, the real focus was how do we evolve the business? How do we take advantage of the fact that certain industries, like Amazon and Walmart in the back half, were seeing booming business. You had dating apps switching to online modes. We had a whole focus which really started to happen in Q3. And then even more so in Q4 of evolving our business for the new realities of people operating during lockdown and operating remotely. And the team really did a tremendous job turning our business around. We went from our pacing models showing us potentially having significant losses for the year to having $30 million profit for the year. SAFIAN: And these pivots, these changes in the business model that you're talking about during the year, I mean, some people say tech adoption accelerated 5, 7, 10 years during the year. How did that practically get manifested? PERETTI: We're a pure digital business. I love the internet. That was the focus of our entire company. So we would think, "Oh, well we should be doing great." But so many of our partners were operating analog businesses that it was a challenge. In the back half of the year, what we saw was the digital businesses really excel. And then every traditional business had to fast track their digital strategy. The digital strategy became the strategy for the whole business during COVID. And as a pure play digital company, BuzzFeed was in a really good position to say, "Hey, why don't you partner with us? And we'll help you go direct-to-consumer, or we'll help you sell products online with our commerce business since your brick and mortar stores are not open." And so we really became a great partner for this digital transformation and continue to do that in our advertising and commerce and content businesses. SAFIAN: Now, late in the year, you acquired HuffPost, which is a return home of sorts for you as a co-founder. Was M&A always in your plan, or was this something that was more opportunistic? PERETTI: It was always in the plan. And I talked about the need for digital media companies to consolidate, to have more scale, more operating leverage, as partners to the big tech platforms. But it was really hard to pull off because none of the digital media companies were in a position of strength to acquire the others. We were all, for the most part, private. We were all in the mode, especially through COVID of conserving cash, not spending cash. And then it was unclear what the value of private stock was. So if you're trying to buy another company and you only have private stock to offer, there's the natural fights between VCs who can't agree on what the stock is actually worth. To the back half of last year, we saw that we had diversified our revenue model. We saw growth re-accelerating, strong profitability. And so when we saw that our model was really working, it was clear now's the time, we're the natural consolidator in this space. We acquired HuffPost. Next we're acquiring Complex Networks. We will have a public currency as we become a public company, and we have considerable cash on the balance sheet to look at other opportunities. We knew there needed to be consolidation. We worked towards building that sustainable, profitable model and getting in a position of strength to be able to make these two acquisitions and hope to do more in the future. SAFIAN: Originally you've been thinking about an IPO as a goal, as a way to sort of actualize the financial value so that you could do more acquisitions. And you shifted over to this alternative approach with a SPAC during the year as well. PERETTI: Yeah. Last year we were starting to explore traditional IPO and then COVID hit. The SPAC market is very interesting because it allowed us to accelerate getting public. So we made up for some lost time, because it's a faster process. It allows you to have price certainty. And it makes it a lot easier to do M&A as part of the process. It's very challenging to do significant acquisitions simultaneously with the traditional IPO. But the SPAC vehicle is actually designed for it. And so we were able to get public faster, have more cash with price certainty, and acquire Complex Networks all at once. SAFIAN: And so those two things, the SPAC and the Complex deal sort of complemented each other that they came together at the same time. PERETTI: Yeah. They were linked together. So some of the proceeds from the SPAC transaction will help us buy Complex from Hearst and Verizon, who are the owners of Complex now. I think some people just have gone public via SPAC because the market is hot, and it's not so hot anymore, so it's harder for companies that aren't really ready to be public to get through the SPAC process. But for a company like us, where we could choose to go public in a traditional way, or we could do it via SPAC, a little faster with M&A, it made a lot of sense. SAFIAN: So with the announcement of the SPAC and the Complex deal, you outlined a three-part plan. You talked about consolidating digital media, which we've talked about a little bit, empowering creators, and then you talk about capturing more value. And I want to ask you about this. You say, "In media, we only capture a small fraction of the value we create." As a media person, that feels familiar to me, but I'd love you to explain what you mean by that. PERETTI: Yeah. I think that what we've seen in the digital space is that intermediaries are ending up capturing a lot of the value when transactions happen.